The authorities are asking people to stay at home because the crisis is expected to last for some time. While some companies allow their employees to work remotely, others do not.
Small companies would suffer as a result of people going out less and turning to alternative buying methods.
Small businesses will need to act decisively and prepare to take advantage of the recovery to prepare for the effects of Covid-19.
CPA Australia, one of the world’s largest accounting associations, offers the following advice:
1. Stay up to date
Keep up with all official Covid-19 material and any public health directives that may be issued.
2. Keep your financial statements up to date
You need access to the most up-to-date information about your financial situation to make effective decisions in a challenging economy.
3. Make a list of the potential consequences for your company.
Calculate the financial impact of the Covid-19 issue on your company and devise mitigation plans. Discuss the potential impact of Covid-19 on your firm with your employees, important suppliers, and key customers.
The following areas are likely to be influenced by businesses:
- Sales: Especially if you don’t have much of an internet presence.
- Staff availability: People’s capacity to work will be limited as their movements are constrained, especially if they are unable to work from home.
- Supply chain: Especially if you rely on suppliers from disaster-stricken areas.
- Finance: Especially if you don’t have a lot of cash on hand.
If your firm has already been impacted, start by making a list of the effects. Even if you haven’t been affected yet, you should be able to make some educated predictions.
When you’re identifying the potential repercussions, try to estimate how much of an impact they’ll have on your business and what strategies you may use to mitigate them.
4. Examine your company’s financial situation.
Knowing the financial health of your company can help you decide what you can and should do now to improve your company’s position during the crisis.
By analyzing your financial statements using financial ratios, you may learn a lot about your company’s financial health and performance.
5. Make fresh assumptions in your finances.
Because of the crisis, the assumptions you used to create your budget are likely to be irrelevant. Take the list of likely Covid-19 effects and re-do your budgeting with your accountant.
Include a variety of previously unimaginable possibilities, such as a 50-80% drop in sales over three to six months or a supplier’s inability to supply you with a vital component for six weeks.
Think up how each of those scenarios will affect your cash flow.
6. Take action right now to enhance your cash flow.
Cash flow will most likely be a problem for your company in the near future. As a result, take immediate action to increase cash flow.
The first stage is to create a cash flow forecast, which should be updated on a weekly basis during the crisis. This will provide you advance notice of any cash flow issues, allowing you to take action before they become serious.
7. Boost your internet sales
Small businesses will need to start selling online or raise the amount they offer online to stay afloat when there are fewer clients around.
It’s critical to research several internet platforms to determine which is best for your company’s needs.
Examine the most effective methods for delivering your products to customers. To eliminate the requirement for physical interaction, service providers should look into digital options for service delivery. As a result, consider closing some of your physical locations.
8. Create a backup plan in case something goes wrong.
9. Speak with major vendors.
Consult with your major suppliers on their ability to deliver throughout the crisis. Consider their ability to create the inputs you require, as well as their ability to get the products to you and the agreed-upon costs/prices.
Travel limitations may affect suppliers, therefore consider establishing alternate sources, including local providers, even if they are more expensive. Now is the time to find them and start negotiating costs.
10. Determine whether or not people with important talents for your company can continue to work or be replaced.
Consider which personnel are irreplaceable and which business operations must continue to function despite this.
Look for people who can help you with the job. Outsourcing could be beneficial.
If such staff may work from home, make sure they bring the necessary equipment with them every night in case you need to close your doors unexpectedly.
Create a specific roster to ensure that vital personnel are available at all times to keep critical company systems and procedures running.
11. Examine your company’s reality.
Use the crisis to reflect on your company, how it was run before the crisis, how you want it to run after the crisis, and whether it is still right for you.
Can you see any new chances for your firm as a result of the crisis?
12. If you find yourself in a financial bind, get expert help as soon as possible.
During a crisis, ask yourself these questions on a frequent basis:
Is your company in a position to pay its creditors, taxes, employee duties, and loan repayments when they are due?
Do you have sufficient cash reserves to fulfill payments due in the coming months?
If you answered no to any of these questions, you should seek expert counsel right away since your firm may be insolvent or close to becoming bankrupt.
If your small business is having financial difficulties, be skeptical of anyone who calls you on the phone and promises financial help.
Such individuals may advise you to liquidate your firm to avoid paying debts and restart your business with a new entity. This is unethical, if not outright unlawful.
Speak to your accountant or lawyer if you are approached by someone cold-calling you providing such advise.